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Waiting for Big Retail

By Rich Alossi and David MarklandPublished: Wednesday, September 15, 2010, at 02:56PM

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DOWNTOWN LOS ANGELES — With fierce competition in the retail sector and a stubborn economy marked by high unemployment, stagnant wages and a tight business lending environment, times are tough for businesses in Downtown. In spite of those challenges, some entrepreneurs have made the choice to start up and make a go of it, targeting the needs of the area’s growing population. They’ve had an open market, since large retailers have yet to make a move on the central city.

Recent years have seen the arrival of a DVD rental shop, numerous bars and restaurants, two bookstores and an explosion of galleries. Still, many Downtown are left wondering when the second phase of the revitalization will come.

Some of those businesses have opened because of a need the owners felt through their own experience as Downtown residents. “Jim had wanted to open up something -- anything -- on Main Street for a long time,” remembers Celia Esguerra, who along with husband Jim Winstead and partner James Adams own art supply store Raw Materials in the Historic Core. Now nearing its two-year anniversary, the business has grown and added services to appeal to a larger audience, offering photo printing, custom framing and art classes for all skill levels. Each new residential building that opens adds to their client base. “Our growth has mirrored the growth of the neighborhood,” Esguerra says.

Others came because they saw their customer base here. Last November, Interior Illusions owner Mike Valles opened iSquared on Spring Street, offering furnishings catering to the modern loft aesthetic. He chose the location to meet the demand of clients who were traveling from Downtown to visit his West Hollywood and Santa Monica showrooms. Based on increased foot traffic over the summer, he considers the venture a success.

Even with these pioneers, what Downtown lacks is a retail core that offers the selection other city centers have, especially in the mid-range market segments, often anchored by a major retailer.

A survey conducted in 2008 by the Downtown Center Business Improvement District, a provider of marketing and safety services in a 65-block area covering the Financial and Jewelry districts, identified electronics retailers and discount department stores as the most sought-after types of businesses among residents and workers. Coming as no surprise, retailers Best Buy and Target were the top two brands mentioned by name, and grocer Trader Joe’s is frequently mentioned in social settings and online forums.

Target in particular has long been rumored to be close to making a move on Downtown, but the retailer continues to hold out.

Once it does sign, that move could be the catalyst needed to really boost Downtown retail. Derrick Moore with CB Richard Ellis believes that the arrival of a major retailer could create an effect similar to the renaissance of Santa Monica’s Third Street Promenade in the early ‘90s, boosting foot traffic to nearby stores and acting as a magnet for more businesses to feel comfortable making a move on Downtown.

Still, it is easy to overlook some of the retail treasures that are found in Downtown’s neighborhoods. Ross Cutlery, a knife and shaving store at 3rd and Broadway, has specialized in professional-quality cooking knives at the Bradbury Building for the better part of a century. Owner Allen Wattenberg and his brother bought the business nearly half a century ago, just as the neighborhood surrounding them began to see a long decline. “The mid-’80s was the low point,” he said, referring to the flight of his customer base to the Westside and suburban shopping centers.

But the thought of leaving Downtown had never occurred to the brothers, due to the multi-generational clientele that has come to rely on the family’s expertise. With business now on the upswing due in part to the company’s knife-sharpening services but also because of the increased livability of the area, Wattenberg mulls the idea of another ten years in Downtown. “I plan to be working here until I’m 80, until I can’t move behind the counter anymore.”

When asked what separates his business from online stores, he responds that his staff helps customers figure out the best product for their needs. “We’ve got a lot of knowledge because we’ve been here 48 years,” he says. “If you’re just looking online at a picture, how do you know if it’s what you need? It’s nice to be able to hold the knife in your hand before you buy it.” Sales even come with a short lesson on keeping new knives sharp at home.

If shuttered storefronts are a sign of a community in decline, then the move toward a more locally self-sufficient economy is partially a selfish one: A vibrant retail scene with a unique character helps to make a region more attractive to tourists and their money, and, by extension, that attracts even more retail.

It also generates money for local government.

The promise of untapped sales tax revenues is gaining traction with City Hall, which this year faced a budget deficit of $485 million. Mayor Antonio Villaraigosa earlier this month unveiled the Shop LA program, pushing for Angelenos to keep their spending within city boundaries by making minor adjustments to their shopping habits.

Villaraigosa argues that if residents value the services provided by municipal government, paying a bit more attention to the meandering boundaries of the city of Los Angeles when shopping can have a big impact on government reserves. According to a press statement, sales taxes constitute the fifth-largest source of revenue in the city, with one out of every ten local sales tax dollars going to fund libraries, street repaving, parks and public safety.

The opening of Ralphs three years ago showed that the community around Downtown could support a grocery market: the location quickly jumped to the top 15 percent in sales for the Kroger chain.

As of yet, though, there has been no second big retail opening. There’s little question that one will come, the question is just when, and who will be first?